Bookkeeping cleanup checklist: what to fix, and in what order

Before you touch anything

A cleanup changes history, so protect the history first. Export the current reports, note which periods were already used for filed tax returns, and agree who will make changes so two people are not fixing the same file at once.

• Export a profit and loss statement, balance sheet and general ledger as they stand today.
• Write down which years have filed tax returns built on these books.
• Collect every bank, card and loan statement for the periods you will fix.
• Decide one person or firm owns the cleanup until it is finished.

The checklist

Work down the list in order. Each step depends on the ones above it.

• Opening balances: every account's starting balance matches its statement on the start date.
• Chart of accounts: duplicates merged, unused accounts made inactive, names that make sense.
• Bank reconciliations: every bank account reconciled month by month to its statement.
• Credit card and loan reconciliations: the same, including interest and principal split on loans.
• Payment processors: Stripe, Square, PayPal and Shopify payouts recorded gross of fees.
• Uncategorized transactions and the 'Ask my accountant' account cleared to zero.
• Duplicates removed: the usual cause is a bank feed and a manual entry for the same payment.
• Transfers between your own accounts matched on both sides.
• Payroll entries match the payroll provider's reports.
• Receivables and payables aging lists only real open invoices and bills.
• Owner contributions and draws recorded to equity, not income or expense.
• Balance sheet reviewed line by line: every balance can be explained.

Fixing opening balances in QuickBooks

Wrong opening balances usually show up as a balance in Opening Balance Equity that nobody can explain, or an account that never reconciles in its first month. The fix is to compare each account's starting balance with its statement on the start date and correct the difference with a dated entry, then check that the first reconciliation now ties out.

Do not fix opening balances by editing reconciled transactions in later months. That breaks reconciliations that were right. If filed tax returns were built on the old balances, agree the correction with whoever prepared those returns first.

Clearing thousands of uncategorized transactions

Thousands of uncategorized transactions look worse than they are. Most repeat: the same vendors, the same subscriptions, the same payouts. Sort by payee, categorize the repeats in batches, and set up bank rules so new transactions from the same payees land correctly. What remains is a short list that only the owner can explain.

Never delete transactions to make an uncategorized balance disappear. If a transaction is a duplicate, prove it is a duplicate against the statement first.

When the last bookkeeper left a mess

Start with the audit log and the reconciliation reports, not the transactions. They show which months were reconciled, who changed what, and when. Months that were reconciled and still tie to the statement can usually be left alone; the cleanup focuses on the months that do not.

Mistakes to avoid

Most cleanups that need redoing made one of these mistakes.

• Categorizing before fixing opening balances, so the reconciliations never tie.
• Undoing reconciled months without a reason.
• Changing periods that filed tax returns were built on, without telling whoever prepared them.
• Recording payment processor deposits net of fees, which understates both sales and fees.
• Leaving personal spending in business expenses instead of recording it as a draw.